What Intermediaries and Shippers Should Know About the Carmack Amendment & Interstate Cargo Claims

Transcription

1 What Intermediaries and Shippers Should Know About the Carmack Amendment & Interstate Cargo Claims August 9 th, 2016 Jason Odgers Jim Farrell Grant Goldsmith

2 Crash Course: Domestic Exposures to Loss & Liability Identifying Transactional Parties, Defining Responsibilities, Exploring Exposures and Recommending Best Practices

3 Panel Jason Odgers, VP Client Development Jim Farrell, Senior Vice President Grant Goldsmith, Vice President

4 OVERVIEW & FOUNDATION Jason Odgers / Roanoke

5 Old Topic, New Perspective Observations 1. Some newly authorized property brokers have not addressed risk management issues 2. General lack of knowledge of liability regimes across the industry

6 Regulatory Oversight Federal Motor Carrier Safety Administration (FMCSA) Administration within the US Department of Transportation Mission: Reduce crashes, injuries & fatalities involving large trucks & busses Monitors & ensures compliance with motor carrier safety & commercial regulations Requires domestic service providers to maintain an operating authority Motor Carriers Domestic Freight Forwarders Property Brokers

7 Carmack Amendment to the Interstate Commerce Act Enacted in 1887 to regulate INTERstate transportation Amended (Carmack) in 1906 Purpose: Establish uniform federal guidelines removing uncertainty surrounding carrier liability for cargo loss/damage Conflicting State Laws Define exposures and provide equal opportunity to address

8 Motor Carriers For-hire Motor Carrier that transports regulated commodities for the general public in exchange for payment. Required to maintain primary auto liability insurance Not required to maintain Motor Truck Cargo Insurance Held to a very high standard of care Allowed only 5 liability exclusions Act of God, Public Enemy, Public Authority, Shipper or Inherent Vice Allowed to limit liability via released rate doctrine Declare liability limitation, give shipper reasonable opportunity to choose between multiple levels of liability, obtain shippers agreement to choice of liability and issue a bl prior to transport reflecting such agreement

9 Domestic Freight Forwarders Non-Asset based Carriers Value added services beyond point to point carriage Hires motor carriers as sub-contractors Represent themselves as carriers in marketing materials and client communications Issues a Bill of Lading as Carrier Assumes primary liability for cargo loss or damage Same cargo liability standards as asset based motor carriers BIPD waived if not operating trucks Required to maintain a bond (75k) to guarantee freight payment

10 Domestic Property Brokers Company, other than a motor carrier, that sells, negotiates or arranges for transportation with DOT regulated motor carriers for compensation Intermediary between motor carrier & Cargo Owner Facilitator / Manager / Match-Maker Required to maintain $75k bond to guarantee freight payment Does not maintain primary liability for cargo loss or damage Permitted to invoice and collect freight charges No insurance requirements as a condition of authority

11 MAP 21 Long term highway funding legislation Included measures designed to reduce crashes, injuries & fatalities involving large trucks & busses Raise bar to enter industry & operate Hold carriers to highest safety standards Remove high risk drivers, vehicles & carriers Included more specific language defining brokerage & prescribed significant penalties, including personal liability for brokers and/or officers of any company acting without appropriate authority. Generally recommended that OTI s & CHB s maintain authority

12 Conclusions OTI s and CHB s: operating authority is only the first step in the process Shippers: understand the role of your service providers and work with them to manage your risk of loss There has been a lot of turn over in the industry since MAP 21

13 LIABILITIES & EXPOSURES Jim Farrell / Integro Insurance Brokers

14 Arranging for Inland Carriage CHB & International FF often arrange inland transportation by truck after cargo is released or prior to an international departure where B/L begins or ceases at port of loading. CHB/FF has no limitation of liability via contract with cargo owner. NVOCC limitation of liability under COGSA only if there is a door to door B/L

15 Do I really need to be Licensed? How is this monitored? What is the civil penalty for a broker or freight forwarder who engages in interstate operations without the required operating authority (registration)? Shipper Requirements- Proof of Bond and Filing with FMCSA

16 Property Broker Liability Property Brokers do not physically move cargo by truck or issue B/L assuming liability (like a motor carrier or domestic forwarder under Carmack). By DOT Regulation, they are not responsible for damage to cargo. However, property brokers do have non-cargo (tort) liability for negligent acts Pay attention to contracts and carrier verbiage If CHB/FF choose not to get licensed with the DOT, shipper will seek full liability under Carmack

17 What Happens when Cargo Loss or Damage Occurs? Were the Goods Insured All Risk? Does the Carrier s MTC Respond? Commodity Restriction? Reefer Exclusion Unattended Vehicle Exclusion Scheduled Vehicle Policy Limits ($100,000) Radius Limitation Identity Theft/ Fictitious Pickup

18 What Happens when Cargo Loss or Damage Occurs? Does the Property Broker carry Contingent Cargo? Follow Form - No broader than underlying MTC form, claim defense (legal liability, shipper contracts are key) Non-Following Form - Not limited by MTC policy

19 Errors & Omissions Improper Selection of a Carrier - Cargo and or Liability Improper Handling Instructions (temperature settings, loading/ stowage, bracing instructions, etc) Carrier Exclusions Electronics/ Granite Slabs/ etc. Identity Theft/ Fictitious Pickup Carrier Vetting Procedures - FMCSA makes no guarantees about the accuracy, completeness or adequacy of the SAFER information

20 3 rd Party Liability/ Contingent Auto Legal Liability for Death, BI and Property Damage involving Motor Carrier hired by the Logistics Operation

21 What to Watch For: One Call Does it All Website Operations Operational Structure

22 What to Watch For: As a PB, do not ID yourself as carrier on bill of lading and don t allow carrier to do the same. Don t refer to carriers as your partner Don t assign carrier driver routes Do not schedule pickup times Don t sign carrier contracts or contracts naming you as carrier

23 CONTRACTS & BEST PRACTICES Grant Goldsmith / Avalon

24 Risk Management Priorities Licensed as Property Broker per MAP 21 Consider a separate business entity for the Property Brokerage Operations Stick to the loads you know Carrier Selection Process is Critical Proper Contracts with Shippers and Carriers Insurance to cover your risks

25 Are you acting as a Property Per MAP-21 changes Broker? If you arrange separately for the onward movement of goods you are acting as a Property Broker File for an MC # with the FMSCA and get a bond for $75,000 and consider insurance required for your operations Talk to your attorney consider setting up a separate entity for the property brokerage business

26 Stick to the Loads you Know Unfamiliar cargoes cause unique problems: Temperature Sensitive Loads Oversized and Over dimension Loads High Theft commodities Loads subject to contractual losses vs actual losses

27 Carrier Selection Process This is a very important process Have a Carrier Selection Process and use a carrier vetting service if possible Try to use fewer carriers allowing you to have a volume of business Select Carriers you know and that provide proper documentation including insurance

28 Required Contracts Shipper Broker Agreement Broker Carrier Agreement TIA model contracts are good examples Contracts should properly define your role and your responsibility and liability Don t over indemnify others

29 Specialty Insurance This business requires special insurance that should follow your contractual needs and address your risk concerns Much of the risk is to the Property Broker is contingent risk for cargo damage or auto liability Your E&O policy should properly define your role as a Property Broker for coverage

30 Common Losses Damage to cargo not covered by the Motor Carrier s Policy (Temp, Theft, Contractual) Auto Liability not covered by the Motor Carrier s Policy (Or exceeding the MC limits available) No response to valid claims by the Motor Carrier s Policy (this happens a lot) Cargo Lost due to Fraudulent Pickup or Stolen due to Motor Carrier Identity Theft (Growing)

31 Fictitious Pickup Claim Inability to Track a Nut Using Identity of Legitimate Carrier Apply to Pickup Load Disappear

32 Claim Scenario 2 Property Broker arranges load of fruit for delivery from warehouse to retail store Fruit rejected by consignee due to some fruit looking spoiled Entire load rejected both good and bad fruit total loss of entire load No evidence of reefer unit breakdown by truck

33 Claim Scenario OTI (LPB) asked to move trailer load of Swiss watches for one of their international clients. Origin: Miami / Destination: New York Load Value: $1.2mm Cargo owners insurance warranted: Team Drivers; Not left unattended; No stop within 100mi of pick up Single driver picked up load, parked at his house, and went to sleep. When he woke up, the trailer had been opened and the watches removed from the truck. Cargo owner was unable to collect on cargo insurance claim Trucker s MTC insurer settled at $100k policy limit Cargo owner sued OTI (LPB)

34 Thank you!